Credit unions could make more loans if the Small Business Administration streamlines its loan approval and evaluation processes and Congress raises the cap on member business loans, Corning FCU President/CEO Gary Grinnell told a House panel on Wednesday.
Grinnell, testifying on behalf of NAFCU, told the House Small Business Committee that the SBA should compare the default rate of loans made by credit unions with financial institutions that have similar loan portfolios.
“The blending of all lenders with varying portfolios to arrive at a dilutes the true picture, as one cannot compare a small SBA unsecured working capital line of credit with a large SBA loan secured with commercial real estate. Clearly the two loans are different and should have different evaluation processes. If this evaluation process is not changed, it may eventually eliminate all small loans from lenders’ portfolios,’’ Grinnell said.
He also said that because many credit unions aren’t preferred SBA lenders, their loan applications are sent out of the region and those evaluating them don’t have a handle on the local economy. In addition, this adds time to the application process and may discourage some credit unions from making those kinds of loans.
Grinnell, whose Corning, N.Y., credit union has assets of $896 million, also said credit unions would make more loans if Congress passed two laws.
He urged lawmakers to pass legislation that would raise the cap on member business loans from 12.25% of assets to 27.5%.
He also urged Congress to pass legislation that would exempt any SBA loan from the meaning of “member business loans,” as defined by the Federal Credit Union Act.
This is the second time this month, Grinnell has testified before Congress. On Oct. 12, he testified before a House subcommittee to urge an increased cap on member business loans.